Question

What happens to the equilibrium position if following incidents are occurred?

i. If consumer income increases.

ii. Number of buyers in the market decreases

Answer 1

• When consumer income increases, the demand for goods and services increases from D to D1. This leads to the shift of the equilibrium from original point Q to a new point Q1.

• When the number of buyers in the market decreases, the demand for products will reduce from D1 to D2. As a result, the equilibrium will shift from Q1 to Q2.